The headlines around the debt-ceiling legislation focused on the ability of the US to meet its financial obligations on time and in full through 2024. This was no small accomplishment, especially as it arrived within a forever-fractured political environment and only 18 months from a presidential election.
But the actual terms of the debt-ceiling legislation reveal a political consensus that is at once troubling and longstanding. While topline US spending will increase this year and next, its increase is reserved almost exclusively for defense and for veterans’ medical care. Other programs, including social welfare and enforcement of the tax code by the IRS, will have their budgets cut. Americans seeking food-stamp benefits will also face increased work requirements – a curiously unrelated throw-in policy that reflects a longstanding wish of Republicans and some Democrats.
Here, the bipartisan consensus is clear: federal overspending is fine when it supports military ventures; it is a problem when it supports social welfare. In navigating the debt-ceiling legislation and the price inflation that has persisted over the last year, US policymakers have consistently drawn on the failed economic doctrine of austerity – popularized in the 20th century and still prominent today – to intervene in a dysfunctional economy. In using these economic instruments, which are known to fail, they reveal their political ends.
At its core, austerity is a suite of economic policies that aims to reduce aggregate demand among the largest population in any society – the working class. Rising interest rates and reduced social benefits, especially in an inflationary economy, require working classes to do more with less. This means working more hours for less money. And who benefits from that environment? A society’s upper crust – the capital class.
The recent debt-ceiling agreement, like the Federal Reserve’s continued increases in interest rates, has been presented under the false pretense that curbing expenditures is a necessary intervention for an economy living beyond its means. This narrative is plainly false. In a capitalist economy like ours, it’s never the size of the debt that matters. What matters is how that debt can be wielded to convince Americans to accept economic decisions as somehow unavoidable – painful concessions that are the result of rational deliberations from economic experts.
The same excusing of economic pain is used to justify military spending at the cost of social spending. Many have argued, convincingly, that the military-industrial complex is to blame for this double standard, with defense spending doubling as a means of economic upward redistribution toward those with influence and power. But even for those who would be critical of that narrative, the question remains: where is the federal debate around unlimited defense spending? Where are the economic hawks lamenting the undisciplined excess of military adventure?
This lack of economic self-reflection illustrates the power of another false principle guiding the American economy, including its tendency toward austerity: it’s not whether the state spends but rather where the state spends. Under austerity capitalism, it is acceptable to use public resources to enrich the very few who profit from real wealth (in the form of dividends and interests), while widespread structural dispossession explicitly serves to “discipline” working people. In other words: economic policy is used as the most important economic lever to perpetuate class warfare.
This principle is readily and concretely evident in the recent debt-ceiling legislation. Of the $15tn in excess US debt, more than half ($8tn) is due to war expenditure.
Against any imperative of cutting expenditures, the latest debt agreement conspicuously exonerates military spending from any cuts. Meanwhile, US spending on the war in Ukraine is predicted to go up in the coming years, reaching $895bn in 2025. These are unprecedented numbers, a shocking 40% of global military expenditure.
And while state spending boosts the profits of big shareholders in the military-industrial complex, and props up stakeholders in the Mountain Valley pipeline despite protests from climate activists in Appalachia, the same policy defunds the Internal Revenue Service, the agency charged with investigating tax evasion. As even the lightest examination makes clear, the US impulse to spend on its military serves the same interests as its refusal to enforce its tax code.
Defenders of the Biden administration’s debt-ceiling bill argue, plausibly, that the legislation could have been worse for working people if the priorities of the most conservative Republicans were met. But the specifics of this worst-case scenario offer little cover for what we got instead: a concretization of austerity policies and a whole new set of levers for one-sided class warfare.
Clara E Mattei is an assistant professor of economics at the New School for Social Research in New York City and the author of The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism
Source: US Politics - theguardian.com
